Maximizing Your Military Benefits 09 January 2014 BG (Ret.) Mike Meese mmeese@aafmaa.com (703) 707-4602
2 American Armed Forces Mutual Aid Association: Founded in 1879 Non-profit, tax-exempt, member owned mutual association Open to all branches of the U.S. Armed Forces Over 90,000 members; over 2,000 flag officers http://www.aafmaa.com/
3 OUR VISION: to ensure the financial security and independence of members of the American Armed Forces community. OUR MISSION: to be the premier provider of insurance, financial and survivor services to the American Armed Forces community. OUR VALUES: Loyalty Empathy Responsiveness Spirit of Collaboration Innovation
Agenda 4 In the Service On Deployment At Retirement VA Benefits Life Insurance (VGLI) At Death (including Burial) Health Care Coverage Paying for College
In the Service Regular Military Compensation* SGT (E-5, 10 years) $63,697 CMSgt (E-9, 24 years) $108,429 Capt. (O-3, 6 years) $96,016 Cmdr (O-5, 18 years) $141,564 *Base Pay + BAS, BAH, tax advantage Well Deserved for Your Service Plus: + Medical + Retirement + Education/Training + 30 days paid leave + Special Pays + Moving Pay + Commissary/PX + Morale/Welfare
What to do with it? 6 Operate Debt Free Develop Long Term Plan: Home buying?? VA Loan (0% down; 2.15% orig. fee) School: Self, Spouse, Children Retirement: Fund Spouse 401k plan Fund Roth IRA for you and spouse Fund Thrift Savings Plan (TSP) For More Info on Saving for Retirement: Listen to 12 Sep 2014 Webinar Use the Opportunities for Financial Well Being
Manage Risk Life Insurance 7 Current Standard: $26/ month $1/ month $5/ month $32/month Total ($27/mo. if single) SGLI Life Insurance for $400,000 TSGLI Traumatic Injury up to $100,000 FSGLI Spouse for $100,000 Better Option: AAFMAA Level Term 1 For $400,000 SGLI $100,000 TSGLI Traumatic Injury up to $100,000 FSGLI Spouse for $100,000 $19/ month $6.50/ month $1/ month $5/ month Total = $31.50/month ($26.50/mo. if single) $100,000 more protection AAFMAA Survivor Assistance Stays after Military
On Deployments Save!! Reduce expenses wherever possible (rent, car, utilities, etc.) Use Savings Deposit Program (SDP) Deposit $10,000 to earn 10%/year a free 1,000! See www.dfas.mil Example: Afghanistan Deployment Pay: Hardship Pay $100 Hostile Fire/Danger Pay $225 Family Separation $250 Tax Exemption up to $1300 Total: $575 $1,875 Per month!
At Retirement Five Decisions 1. Survivor Benefit Plan to replace retired pay 2. Life Insurance to replace SGLI 3. VA Disability Determination and Payments 4. Medical Insurance to replace military medical 5. Dental Insurance to replace military dental
Retirement and Survivor Benefit Plan (SBP) Lifetime Annuity 6.5% Family COLA Insurable Interest Survivors Life Expectancy Retirement benefit Spouse concurrence Child only Subsidized benefit Spouse 55% beneficiaries Pre-tax premium
Military Retirement Basics 11 Total Retirement Pay: 2.5% * Years * Highest salary (< 8 Sep 1980) High-3 salary (Sep 1980-July 1986) High-3 or REDUX (> 31 July 1986) Example of New Law Cost of Living Increases: Previously: COLA = Inflation 2013 Bipartisan Budget Act: Inflation minus 1% until 62 Catch Up at age 62 Full COLA from 62 onward Assume a 47 year old LTC at 24 Years retires this year; Inflation = 3% Retirement today = $5,205 per month Retired pay increases only 2% per year for 15 years until age 62 Age 62 retired pay = $7,005 ~ $1,100 behind inflation per month At age 62, retired pay would catch up to $8,109 and then get full COLA
12 Survivor Benefit Plan (SBP) -- Basics Total Retirement Pay: 2.5% * Years * Highest salary (< 8 Sep 1980) High-3 salary (Sep 1980-July 1986) High-3 or REDUX (> 31 July 1986) After you die, retirement pay stops for your spouse, but you can continue 55% of retirement pay by paying a premium of 6.5 percent of your retired pay (using pre-tax dollars) Surviving Spouse Share 55.0% See: DoD SBP website 6.5% 0.0% Cost to have retired pay continue for spouse
SBP Calculations (Spouse + Child) 13 Cost: 6.5% + child premium Example: LTC with 24 years of service SBP Base Amount = $ 5,205 (per month) Retiree 47, Spouse 45, Youngest Child 13 Cost: $ 338.35 + $ 0.62 = $ 338.95 Benefit: 55% ($ 2,863) Spouse receives payment for life Shared among all eligible children If spouse dies, children receive payment until 18 or 22 Is it worth $338/month for spouse to receive $2,863/month after service members death?
14 Survivor Benefit Plan Considerations + COLA adjusted growth + Government subsidized + Paid with pre-tax dollars + No evidence of insurability + Paid up after 30 years + Spouse Age not considered No return if spouse dies first No cash value Benefit is taxable No residual estate Spouse payment ends if remarried before age 55 ~ Must get spouse concurrence to take less than maximum ~ Permanent choice (can disenroll at 24-36 months)
SBP vs. Life Insurance 15 SBP Lifetime, monthly, COLA adjusted benefit Pre-tax premiums Fixed beneficiary(ies) Age, health, lifestyle NOT considered Insurance Fixed sum benefit No tax break on premiums May change beneficiaries anytime and have remaining estate Eligibility based on health, age, lifestyle See: DoD Actuary SBP Comparison
16 Survivor Benefit Plan -- Variations Base Amount : $300 Full Retired Pay Designated Payees: Spouse Only Children Only (until 18 or 22) Spouse & Children (until 18 or 22) Former Spouse & Children Future Spouse or Children: Can start/change/restart If single, can be someone with insurable interest (more costly)
17 SBP Reserve Component Options Options Member Dies Before Reaching Age 60 Member Dies After Reaching Age 60 (A) Member waits to age 60 to make election (B) Survivor annuity deferred to age 60 or date of death, whichever is later (C) Survivor annuity beginning at time of death No survivor benefit, however, the surviving spouse (dependent) is eligible for medical benefits. Eligibility begins on the date the member would have turned 60. 55% of what retired pay would have been at age 60 reduced by actuarial charge, plus medical care to include TRICARE 55% of what retired pay would have been at time of death reduced by actuarial charge, plus medical care to include TRICARE 55% of the elected base amount. 55% of the elected base amount reduced by actuarial charge 55% of the retired pay reduced by actuarial charge
Life Insurance Types of Insurance VGLI
19 Veterans Group Life Insurance (VGLI) Term/Temporary Life Insurance Policy Maximum coverage $400,000 (like SGLI) Available in increments of $10,000 Accelerated death benefit option (50% of death benefit paid if terminally ill) Convertible to permanent (whole life) commercial policy Renewable at 5-year intervals No proof of medical insurability if elected within 120 days of separation/retirement Have one year and 120 days to elect VGLI coverage (but do it in first 120 days!)
VGLI Rates - $400,000 Coverage 20 Age Monthly Premium Current SGLI Premium $26.00 40 44 $68.00 45 49 $88.00 50 54 $144.00 55 59 $268.00 60 64 $432.00 65 69 $600.00 70 74 $900.00 75+ $1,800.00
Age, Conditions affect Rates 21 Assumption: $400,000 Term Insurance for non-smoking 53 year old male with a 20 year level term varying AAFMAA rate classes VGLI Super Select Select Standard Class 1 Class 2 USAA LT V 50 54 $144 $79.80 $95.00 $155.00 $232.50 $310.00 $196.15 55 59 $268 60 64 $432 65 69 $600 70 74 $900 $79.80 $95.00 $155.00 $232.50 $310.00 $196.15 Smoker Rates n/a $296.60 $419.40 $629.10 $838.80 $510.13
VA Benefits
23 Why is VA Disability Rating Important? Forces you to document your medical history Gives you priority in VA system Helps prove service connection if condition worsens Provides tax free VA compensation Can provide additional pay for: Combat Related Disability or Concurrent Receipt for over 50% disability Supports service-connected death claim
24 Vietnam Agent Orange Presumptive Conditions Acute and Subacute Peripheral Neuropathy Non-Hodgkin s Lymphoma AL Amyloidosis Parkinson s Disease Chloracne (or Similar Acneform Disease) Porphyria Cutanea Tarda Chronic B-cell Leukemias Diabetes Mellitus (Type 2) Hodgkin s Disease Ischemic Heart Disease Soft Tissue Sarcoma (other than Osteosarcoma, Chondrosarcoma, Kaposi s sarcoma, or Mesothelioma) Multiple Myeloma Non-Hodgkin s Lymphoma Parkinson s Disease Porphyria Cutanea Tarda Prostate Cancer Respiratory Cancers See the AAFMAA Agent Orange Webinar on 14 November 2013 -- Link
Gulf War Syndrome Illnesses 25 If you were in Desert Shield, the following conditions, if they are or become chronic, are presumed to be service-connected: Fatigue Chronic Fatigue Syndrome Headache Neurological symptoms Sleep disturbance Gastrointestinal symptoms Irritable Bowel Syndrome Abnormal weight loss Signs/symptoms involving skin Muscle/joint pain Neuropsychological symptoms Symptoms involving respiratory systems Cardiovascular symptoms Menstrual disorders Must be chronic condition (> 6 months) and during Gulf War or NLT 31 Dec 16; see VA Gulf War website for more details
VA Compensation 26 For Service-Connected Disabilities single with spouse 10% $131 $131 20% $259 $259 30% $401 $449 40% $578 $641 50% $822 $902 60% $1,041 $1,137 70% $1,312 $1,424 80% $1,526 $1,653 90% $1,714 $1,858 100% $2,858 $3,017
VA Disability and Retired Pay 27 Retired Pay (LTC @ 30 yrs) $5,205 VA Disability (assume 30%)* - 449 DFAS (Taxable Pay) $4,756 VA (non-taxable pay) + 449 $5,205 Benefit 15% Marginal Tax ($449 X.15) = $67.35 of VA 28% Marginal Tax ($449 X.28) = $125.72 Disability 31% Marginal Tax ($449 X.31) = $139.19 *If 50% or combat related VA Pay is additive
Benefits at Death
Benefits at Death 29 Active duty $100,000 death gratuity Service-connected illness: Refund of all SBP payments (if SBP selected) Portion of widow s retired pay tax free ($1,215/mo.) VA Burial Benefit of $2,000 Surviving spouse must apply to VA Cause of death on death certificate is critical for service connection No service connection no VA compensation
Burial Benefits 30 30 Gravesite in National Cemetery Expenses: $2,000 if service related; Otherwise $300; plus $700 if not buried in national cemetery Headstone: Standard government headstone Burial Flag and Memorial Certificate(s) Spouse or minor children may also be buried in a National Cemetery See: VA Burial Benefits
Health Insurance Medical Dental
32 32 TRICARE for Retirees TRICARE Prime What is it? Managed Care Option Fee-for-service Who do you see? Enrollment and Fixed costs Variable Costs Works through PCM (like active duty); no claims; referrals to specialists; In specified areas Enrollment required $ 273.84/individual $ 547.68 /family $0 preventative services $12/visit for PCM/referrals $20/ambulance $30/emergency room $40/behavior health $11/day in hospital TRICARE Standard and Extra Any authorized provider; you or provider submit claim form; referrals not required; authorization required for some procedures No enrollment fee. Deductible required: $150/person $300/family 20% of Extra in network provider 25% of Standard non-network 25% or 20% /ambulance 25% or 20% /emergency room 25% or 20% /behavioral health $250 or 25%/day in-network hospital $698 or 25%/day non-network hospital Pharmacy $0 - $17/medicine $0 - $17/medicine [same] Catastrophic Cap $ 3,000/family per year $ 3,000/family per year [same] See: www.tricare.mil
Other TRICARE Variants 33 TRICARE Young Adult (children 23 to 26) TRICARE Prime (or Standard) Overseas TRICARE Prime Remote US Family Health Care Plan (6 locations) TRICARE for Life (at age 65 with Medicare)
34 TRICARE Retiree Dental Program Retiree monthly premium: Single Couple Family NY $ 29 $ 58 $106 VA $ 37 $ 72 $132 NC $ 29 $ 58 $106 TX $ 29 $ 58 $106 CO $ 34 $ 66 $119 CA $ 37 $ 72 $132 Shop on internet to find other coverage that may be more appropriate and less expensive. Active Duty Premium = $11 single, $33 family See: www.trdp.org Diagnostic/Preventative 100% (exams/cleaning) Basic Restorative (fillings) 80% Major Dental Care (Root canal, etc.) 60% Emergency (minor pain) 80% Dental Accident Coverage 100% Crowns, Bridges, Dentures, Implants 50% Orthodontics 50% Annual Deductible Annual Maximum (per person, per benefit year) Orthodontic Maximum (per person, per lifetime) Dental Accident Maximum (per person, per benefit year) $50 person $150 family $1200 $1500 $1000
Paying for College
Post 9/11 GI Bill 36 Eligible: after serving 36 months (after duty service obligations) Entitlement: 36 months of payment (4 x 9-month school years) Pays: All tuition/fees for in-state public or $18,077 at private Yellow Ribbon program can supplement private school costs Monthly Housing Allowance (~BAH for E-5) Books/Supplies stipend of $1,000 Can transfer benefits to spouse/children if you agree to serve 4 more years Can divide months among children School officials can help with coordination See: VA Post 9/11 GI Bill
We have covered: 37 In the Service On Deployment At Retirement VA Benefits Life Insurance (VGLI) At Death (including Burial) Health Care Coverage Paying for College
More Questions? 38 Survivor Benefit Plan (SBP) http://militarypay.defense.gov/survivor/sbp/index.html SBP vs. Insurance http://actuary.defense.gov/ Veterans Administration 1-800-827-1000 www.va.gov Retired Pay (DFAS Cleveland) 1-800-321-1080 http://www.dfas.mil/retiredmilitary.html BG (Ret.) Mike Meese mmeese@aafmaa.com (703) 707-4602